The US Dollar has seen its best days throughout the last two months, with the infamous Petrodollar trade grabbing all the attention from Market participants and flows.
Crude Oil prices, denominated and traded in US Dollars, rose by close to 100% from mid-February to just yesterday, amid a historic and brutal conflict in the Middle East.
A 6-week-long operation led by the US and Israeli armies against the Islamic regime of Iran completely changed the geopolitical picture, which in turn affected Markets in a striking manner.
The de facto closure of the Strait of Hormuz, which facilitates the movement of close to 20% of global Energy commodity flows, has completely rocked inflation expectations and, for the regular Economy and all its participants, prices at the pump.
With much higher petrol prices, entire regions, particularly those dependent on Middle Eastern oil, had to race to hedge against the risk of shortages, and, by doing so, convert their currencies to the US Dollar, which created its own self-fulfilling prophecy.
Add to it pre-existing short-positioning, and a Fed that was starting to get priced for rate hikes as Inflation expectations exploded, and the cocktail for the Greenback was a profitable one.
